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A European court ruling that forced the UK Treasury to scrap its tax on share issues in Europe could lead to a broader rethink of stamp duty on share trades within the UK, according to a leading accountancy firm.

The Treasury said yesterday it will scrap the 1.5% stamp duty reserve tax on the issue of shares into a clearance service in the European Union, after losing a case brought by HSBC at the European Court of Justice.

Although the ruling will not affect the Treasury’s 0.5% tax on share purchases within the UK, it “attacks the underlying basis for stamp duty in the UK”, according to Peter Cussons, head of the EU direct tax group at PricewaterhouseCoopers.

The ECJ case concerned HSBC’s purchase of French rival CCF in 2000. The UK bank argued that the £27m (€29m) it paid in British stamp duty, after issuing new shares to CCF shareholders through a French clearing service, contravened EU law.

The judgement in favour of HSBC paves the way for other UK companies that have paid tax on share issues in Europe or the US since 1986 to claim the money back and may lead to a broader rethink of stamp duty, according to Cussons.

He said: “Her Majesty's Revenue and Customs will have to redesign the stamp duty law to accommodate the ruling and close the hole, and will need to answer the underlying question of whether the transfer tax on shares is a good idea.”

The London Stock Exchange has repeatedly called for the Government to remove stamp duty, which it says makes up 77% of the cost of trading UK shares, compared with 0.6% for exchange fees.

The tax is something of an anomaly. Trading is free in Germany and France, while US investors pay a negligible amount to cover the running costs of the Securities and Exchange Commission.

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However, it is a significant money-spinner for the Treasury, which last year raised £4.2bn from stamp duty, and expects to raise over £3bn this year.

A spokesman for the Treasury said the Government's position remained that "transactions involving UK shares should bear their fair share of tax". He said: "In light of yesterday's judgment, we will determine whether and how to amend the stamp duty reserve tax rules to ensure movements of shares into and within clearance services bear their fair share of tax, whilst ensuring the rules are compatible with Community law."